This week was dominated by lockdowns with nearly half of all Australians under stay-at-home orders as a result of Sydney’s continued lockdown and Melbourne joining them during the week.

Interestingly, it didn’t seem to stop the momentum of the housing market with auction numbers still strong over the weekend.

Sydney’s auction clearance rate came in at 77 per cent from 786 auctions, while Melbourne’s clearance rate was 76 per cent from 1,017 auctions. Both of those cities’ clearance rates and auction volumes are unusually high for the middle of winter.

Elsewhere, Brisbane, Canberra and Adelaide all ran at plus 80 per cent clearance rates from their lower volumes.

What you might have missed in all the mayhem – due to it being announced within hours of Melbourne’s lockdown – was the amazing employment numbers for June.

Australia’s unemployment rate hit a ten-year low of 4.9 per cent at the end of June.

That puts unemployment within 0.6 per cent of where the government forecast it to be in its budget, and 0.1 per cent ahead of where it was forecast to be by June 2022.

During June, 51,600 Aussies found full time employment, which was on top of the 115,000 who found work during May. It now means 679,000 Australians are unemployed versus the 1 million unemployed in July 2020.

It will be interesting to see how those numbers fare during lockdown-affected July, but also whether or not there has been an impact on wage growth. June quarter wage growth figures won’t be released until mid-August unfortunately. reported that the number of overseas-based buyers searching for Australian property was down in June. Being the middle of winter, that’s not surprising.

What is surprising, however, is that searches from New Zealanders have increased by 35 per cent since April. 

We think this might have something to do with the fact that New Zealand changed its tax policy for property investors earlier this year.

From March 2021, you can no longer claim interest as a tax deduction on residential property in New Zealand. And you now have to pay capital gains tax on an investment property if you sell it within five years if you bought it new, and ten years if you bought it established – that’s double the previous requirement (as you can see, their tax system is different to ours).

In addition to that, their Reserve Bank now requires property investors to have a 40 per cent deposit as a minimum.

These measures were introduced because New Zealand has experienced 23 per cent growth in house prices in the past 12 months, with a lot of that driven by investors.

We won’t experience changes like this in Australia anytime soon. The Reserve Bank of Australia has already said it is not its job to become involved in housing policy, plus our housing boom today is being driven by owner-occupiers.

The Federal Government won’t be going anywhere near that one either, after the 2017 Federal election result.

However, it will be interesting to watch the space on New Zealand investment in Aussie housing.

Finally, according to CoreLogic, it’s cheaper to buy than rent in 36.3 per cent of suburbs in Australia.

That’s up from 34 per cent in February 2020, and it’s based on the principal and interest repayments on an 80 per cent loan to value ratio loan, as compared with the median rent in an area.

It’s a different story in Sydney and Melbourne where just 4.9 per cent and 7.3 per cent of houses are cheaper to own than rent.

However, the smaller cities are taking up the slack with Adelaide sitting at 47.4 per cent, Brisbane 55.3 per cent and Peth at 59.6 per cent.

Not surprisingly, it coincides with areas that have higher rental yields – and therefore cash flow – with Ipswich and Logan coming in at 80 per cent, and the north of Adelaide running at 68.4 per cent.

It just goes to reiterating the fundamentals of what’s driving our housing market today – record low affordability.

The average new mortgage rate for an owner-occupier today has fallen from 3.21 per cent in February 2020 to just 2.4 per cent in May 2021.

As an aside, we did find one figure peculiar. It’s cheaper to buy than rent for 62.5 per cent of houses on the Gold Coast, but only 38.8 per cent of houses on the Sunshine Coast. We found that one surprising – we thought the figures would be similar.

As always, it pays to do your research as an investor and it’s vitally important to get a good balance between growth and cash flow, prioritising areas with strong underlying demand.

If you want to learn more about the housing market and what’s happening in it, join us on our client webinar next week.

Interested in knowing more? Check out the weekly podcast we do at  The Double Shot Podcast.

James and Alex

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